Optus: Affordability key to NBN success

Telstra will drive prices through the roof if the government does not get regulation right, claims Optus.

Optus has made it clear that a single national network with equal access wholesale pricing is key to the success of the NBN. The top dog in the Terria group rejected Telstra's charge of hypocrisy against the structural separation of Optus' parent SingTel in Singapore, and accused the incumbent of seeking inflated access prices in its regulatory submission to the federal government.

Optus' general manager of regulatory affairs, Andrew Sheridan, said affordability and equal wholesale access are critical to driving customer take-up of next generation broadband services.

"A key issue we need to focus on is pricing - wholesale pricing drives consumer pricing. Telstra talks of being a premium service provider and in its regulatory submission it talks about how it ought to have flexibility to experiment with prices and set prices based on value rather than cost.

"That is something the government should not be entertaining because it doesn't translate to affordable broadband services," Sheridan said.

Optus' main concern with the NBN is the much-publicised debate surrounding the regulatory regime that will determine the framework for provision of wholesale access to the NBN.

Australia's number two telco has made it clear, along with the rest of the Terria group and the majority of regulatory submitters, that some form of structural and functional separation of whoever the NBN owner/operator will be is required to drive competition and consumer uptake.

"In terms of separation we've always put forward as part of the G9 that we will have a separate model. One of the things we're concerned with is to make sure there is no repeat of the anti-competitive behaviour that went on when Optus rolled out its HFC network," Sheridan said.

He said the Special Access Undertaking the G9 group put forward to the government last year sets out a clear structural and functional separation model, exemplified by British and New Zealand experiences, that Optus insists will apply equally to itself should it win the bid for the NBN.

"In terms of the BT and New Zealand model, essentially what they've done is put the network wholesale and retail into separate units within the same group. But there are very clear Chinese walls and governance arrangements in terms of how they transact with each other."

Sheridan says Optus wants to see that approach taken a step further in Australia, where the network is owned by a separate company.

"I think the model we've put forward would very much envisage that -- it certainly wouldn't be Optus owning and running the NBN. It would be a separate company that Optus and all the other carriers could have an investment in, and there could be other debt and equity stakeholders," he said.

Because that company would only offer wholesale network services, its sole incentive would be to maximize usage of the network through competitive pricing and innovative services. With its $4.7 billion contribution, the government would also have some control in the company.

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Sheridan dismissed Telstra's claims that it is the only prospective NBN bidder with the know-how to build the NBN, and refuted allegations that Optus' parent SingTel is touting separation here while fighting it in Singapore

"In Singapore the SingTel position is quite clear: it obviously has a strong position in its market and like Telstra over here it is interested in protecting its business and shareholders. But what SingTel actually said was that if there is public money being invested in a national network then it should be subject to separation. However, for private networks where there might be a rival national network then there isn't really a case for separation.

"If there were two national private networks in Australia there wouldn't be a case for separation. But there isn't; there is only one. And the government is proposing to put almost $5 billion of public funding into upgrading that national network, so there is a very strong case for separation."

In Optus' regulatory submission to the government it proposes a number of options for utilizing existing network infrastructure during the switch over to the new network.

"We should try and look at utilizing as efficiently as possible some of that existing infrastructure. There is no doubt that some of the customers today are receiving services that already exceed the minimum requirements set out by the government and people are happy with those services."

Optus has proposed a number of options to keep some of the legacy equipment in place, including an "outside-in" migration plan.

"You start cutting over to the FttN in the regional areas first and then come along to the metropolitan areas, there's a range of different options being looked at. We think it's important to at least maintain some of that competitive infrastructure for a period of time," Sheridan said.

He also revealed Optus wasn't entirely satisfied with the government's request for proposal for NBN bidders, stating that a lack of clarity and weighting of criteria for the new network has created uncertainty among NBN proponents.

"With an investment and an infrastructure of this nature, and with nearly $5 billion of public money going into it you want to make sure there is a transparent and open decision making process, not something that's done through back-door deals and negotiations. I think the RFP could have perhaps been a lot clearer in terms of what these specific criteria were and how they will be ranked against each other," he said.

"This will be a single national platform and its important to ensure that there is strong competition on that platform and its really the regulatory settings that will drive that."